BACKGROUND: Access to tertiary care is a problem common to many small states, especially island ones. Although medical treatment overseas (MTO) may result in cost savings to high income countries, it can be a relatively high cost for low and middle income source countries. The purpose of this study was to estimate the costs of overseas medical treatment incurred by the households of medical travelers from Maldives and assess the burden of medical treatment overseas on the government and on households. METHODS: A survey was conducted of inbound Maldivian medical travelers who traveled during the period June - December 2013. Participants were stratified by the source of funds used for treatment abroad. Three hundred and forty four government-subsidized and 471 privately funded Maldivians were interviewed. Self-reported data on the utilization and expenses incurred during the last visit abroad, including both expenses covered by the government and borne by the household, were collected using a researcher administered structured questionnaire. RESULTS: The median per capita total cost of a medical travel episode amounted to $1,470. Forty eight percent of the cost was spent on travel. Twenty six percent was spent on direct medical costs, which were markedly higher among patients subsidized by the government than self-funded patients (p = <0.001). The two highest areas of spending for public funds were neoplasms and diseases of the circulatory system in contrast to diseases of the musculoskeletal system and nervous system for privately funded patients. Medical treatment overseas imposed a considerable burden on households as 43% of the households of medical travelers suffered from catastrophic health spending. Annually, an estimated $68.9 million was spent to obtain treatment for Maldivians in overseas health facilities ($204 per capita), representing 4.8% of the country's GDP. CONCLUSIONS: Overseas medical treatment represents a substantial economic burden to the Maldives in terms of lost consumer spending in the local economy and catastrophic health spending by households. Geographical inequality in access to public funds for MTO and the disproportionate travel cost borne by travelers from rural areas need to be addressed in the existing Universal Health Care programme to minimize the burden of MTO. Increased investment to create more capacity in the domestic health infrastructure either through government, private or by foreign direct investment can help divert the outflow on MTO.